Perform as many shows as possible. Your record label will expect constant touring from you to promote your album, so you need to demonstrate that you're willing and able to commit to it. You'll also work the rough spots out of your material before you have to perform for an A&R (Artist and Repertoire) representative. Promote your shows in every accessible outlet. Create a website along with an email list, promote yourself to your local music papers and e-zines, and post as many flyers for your gigs as you can afford to print. Network within your local music scene, getting to know the fans and musicians who frequent the same clubs your band does. You'll increase fan loyalty and make professional contacts who may be able to help you get signed.
A record label representative must be confident your band has at least two full albums worth of good songs before she'll sign you to a deal. You have to demonstrate that you can consistently write original material that the label thinks will excite their target audience. Write constantly and try out your new material at shows as soon as your band can play it proficiently. After a few shows, audience response will let you know which of your new songs are worth keeping in your repertoire, which need refining and which need to be dropped.
Find a label that handles your band's musical genre and get the name of a person who screens incoming demos. Addressing your demo to a specific person leaves a better, more lasting impression than simply addressing it to a label's A&R department. Record about six of the songs that your audience loves the most. You'll probably only have one chance to impress this label's representative, so these songs have to be your best. Send your demo to publishers, disc jockeys and producers. While they can't directly get you a record deal, they can raise your profile and help get a label's attention. Find out what your prospective label's submission format is before you send your demo. Some labels accept MP3 files, but others only take CDs.